So much coffee is now being produced in the world that global prices are crashing, according to new data.
A record seasonal surplus of beans being produced pushed down coffee futures to their lowest levels in more than a decade during April, with a rise in demand for caffeinated drinks failing to stem the plummeting prices.
In Brazil, the world’s largest producer of coffee, a surge in production of arabica and robusta beans, as well as a weak currency, has led to a dramatic oversupply of the commodity within the world market, putting a downward pressure on prices.
Producers in traditional coffee heartlands in Central America, Colombia and Ethiopia have been reportedly considering to call time on the coffee business in the wake of the price slump, sparking fears for the future of the industry and local economies.
“C” arabica futures, one benchmark for global coffee prices, tumbled 29 per cent from October 2018 to April, when they hit a 13-and-a-half year low, according to IHS Markit’s Agribusiness Intelligence.
Meanwhile, coffee production rose to a record 174.6m bags of 60 kilogram beans during the current season, marking an eight per cent rise on the previous year.
“Poor global coffee prices may take their toll on production next season as they may entice farmers to cut costs and save on crop inputs,” warned Stefan Uhlenbrock, a senior commodity analyst at IHS Markit’s Agribusiness Intelligence
Uhlenbrock added: “Although global consumption is continuing to rise, it’s difficult to construe a bullish picture at this point. The rise is still only small and the ample availability of coffee in the coming months is likely to keep bearish sentiment alive for the time being.”
While global coffee consumption is still forecast to rise by 1.8 per cent this year, IHS Markit believes it is not enough to pull the world market back into deficit.